Abstract

http://ssrn.com/abstract=2231859
 


 



Shame, Regret, and Contract Design


Eric A. Zacks


Wayne State University Law School

June 10, 2014

Marquette Law Review, Vol. 97, Spring 2014, Forthcoming
Wayne State University Law School Research Paper No. 2013-05

Abstract:     
This Article examines whether contract design can influence the post-formation behavior of the non-drafting party. If it can, contract preparers may be able to obtain significant transactional advantages. This Article suggests that several contractual features can be explained in terms of their ability to exploit the cognitive biases of, and to induce particular “advantageous” emotions from, the non-drafting party after the contract has been executed. These features may include arbitration provisions, disclosures in capital letter or bold face type, “reliance” language, and language framing possible losses in particular ways. Contracts can encourage individuals to feel shame, to blame themselves, to believe that contracts are sacred promises that should be specifically performed, to utilize faulty judgment heuristics when determining contract costs, and to rely on misperceived social norms with respect to challenging or breaching contracts. This may influence them not to breach or challenge an otherwise uneconomical, unconscionable, or illegal contract. Consequently, contract preparers may be able to enjoy the benefits of promises that often would not be realized if the non-drafting party were profit-maximizing like the contract preparer.

Number of Pages in PDF File: 51

Keywords: shame, regret, contract, moral promise, contract design, regret theory, cognitive bias, judgment heuristic, strategic default, efficient breach, arbitration

Accepted Paper Series


Download This Paper

Date posted: April 9, 2013 ; Last revised: June 11, 2014

Suggested Citation

Zacks, Eric A., Shame, Regret, and Contract Design (June 10, 2014). Marquette Law Review, Vol. 97, Spring 2014, Forthcoming; Wayne State University Law School Research Paper No. 2013-05. Available at SSRN: http://ssrn.com/abstract=2231859

Contact Information

Eric A. Zacks (Contact Author)
Wayne State University Law School ( email )
471 West Palmer
Office 3261
Detroit, MI 48202
United States
HOME PAGE: http://www.law.wayne.edu/faculty/bio.php?id=74920
Feedback to SSRN


Paper statistics
Abstract Views: 594
Downloads: 125
Download Rank: 131,857
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.391 seconds